Correlation Between Semtech and Western Copper

Can any of the company-specific risk be diversified away by investing in both Semtech and Western Copper at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Semtech and Western Copper into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Semtech and Western Copper and, you can compare the effects of market volatilities on Semtech and Western Copper and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Semtech with a short position of Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Semtech and Western Copper.

Diversification Opportunities for Semtech and Western Copper

-0.24

Correlation Coefficient

Semtech  Western Copper

Very good diversification

The 3 months correlation between Semtech and Western is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Semtech and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper and Semtech is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Semtech are associated (or correlated) with Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Semtech i.e., Semtech and Western Copper go up and down completely randomly.

Pair Corralation between Semtech and Western Copper

Given the investment horizon of 90 days Semtech is expected to generate 1.17 times more return on investment than Western Copper. However, Semtech is 1.17 times more volatile than Western Copper and. It trades about 0.14 of its potential returns per unit of risk. Western Copper and is currently generating about 0.0 per unit of risk. If you would invest  2,062  in Semtech on September 4, 2024 and sell it today you would earn a total of  4,633  from holding Semtech or generate 224.68% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Semtech  vs.  Western Copper and

Semtech

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Semtech are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of rather inconsistent basic indicators, Semtech exhibited solid returns over the last few months and may actually be approaching a breakup point.

Western Copper

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Western Copper and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Western Copper is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Semtech and Western Copper

The main advantage of trading using opposite Semtech and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Semtech position performs unexpectedly, Western Copper can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Western Copper will offset losses from the drop in Western Copper's long position.

The idea behind Semtech and Western Copper and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.